Nickel & stainless: conflict shocks sector

Higher gas and oil prices driven by the Iran crisis have struck hopes of growth with analysts seeing structural stresses to supply chains.

The Lunar New Year holidays in mid-February heavily reduced activity on the Asian markets with restocking activity largely completed before workers took leave. By late-February the global markets were suddenly facing a new and unexpected challenge because of the conflict in the Middle East.

Gas and oil prices continued to rise in the weeks after the initial military strikes with Brent Crude oil prices firmly above US$ 100 per barrel, WTI prices around US$ 90 per barrel and LNG prices also soaring. As well as driving higher transport costs and freight rates, production costs for steel producers have also surged.

With the Strait of Hormuz remaining largely impassable amid concerns over security and insurance issues, global trade has been further slowed.

With hopes of a quick resolution fading, analysts are now seeking to forecast the impact of the reduced energy supply on the various markets, with previously expected rate cuts in some regions now firmly off the cards.

‘The conflict has now moved beyond a short-lived geopolitical shock and into a phase where supply losses are increasingly structural rather than transient,’ says ANZ strategist Daniel Hynes.

REDUCED CAPACITY

Stainless steel prices in Europe are on an upward trajectory from a combination of factors which includes the higher production costs, increased carbon costs linked to the start of CBAM in the bloc and a growing tightness in scrap supplies regionally.

In India, Jindal Stainless confirmed that production capacity had been reduced because of the ongoing fuel disruption. ‘Due to the heavy dependence of stainless steel manufacturing on industrial gases such as ​propane/LPG and natural gas, several processes across ​our plants have been adversely impacted,’ its filing said.

‘Additionally, disruptions in global shipping routes are resulting in vessel diversions, longer transit times, and cargo delays, which are also placing additional pressure on supply chains and margins.’

In March, the company commissioned its joint venture, 1.2 million tonnes per year, stainless steel melt shop in Indonesia.

STRATEGIC STEEL

Turning to policy, Outokumpu welcomed the European Union’s proposed Industrial Accelerator Act, looking to a framework of measures for accelerating industrial capacity and decarbonisation in strategic sectors. The producer said the policy would increase demand for clean products, protect economic security and speed up decarbonisation in energy intensive industries.

However, Outokumpu calls for further additions to the act, including an EU low-carbon steel label and low-carbon criteria for the stainless sector. The producer argues the ‘Made in EU’ requirement should also be widened to steel.

On raw materials, SGX iron ore futures prices for 62% Fe briefly dipped below US$ 100 per tonne in late February amid oversupply concerns as inventory at ports reached multi-year highs, in addition to orders to reduce blast furnace operations in some regions in China for the Two Sessions meeting.

Prices crossed back past US$ 100 in March and remained firm, gaining momentum to reach US$ 107 in the latter part of the month amid fresh tensions between China Mineral Resource Group and BHP.

A cyclone in late-March, temporarily closing Pilbara ports and reducing operations in the region, also boosted the futures prices on supply concerns.

NICKEL FLUCTUATION

London Metal Exchange three-month nickel prices have also seen large fluctuations during recent weeks, trading in a range that was wider than US$ 1 000 per tonne. They reached US$ 18 000 during late-February before falling sharply towards US$ 17 000 into March. Despite a rise to US$ 17 700 mid-month, prices dropped back towards US$ 17 000 by the close.

Prices were supported in late February by the heavily reduced nickel ore quotes given to miners in Indonesia, with further gains coming from news that the LME will suspend deliveries of nickel briquettes and cathodes from a Finnish producer into warehouses from June.

News of tariffs being imposed in Indonesia on coal and nickel exports also gave space for a move higher, although such levels were not sustained. Daily analysis by Sucden Financial said this ‘suggests that while policy support can drive short-term upside, the market remains sensitive to positioning and liquidity dynamics’.

LOWER STOCKS

LME warehouse stocks of nickel stood at 287 976 tonnes by the end of February, on-par with 285 528 tonnes recorded in late January. In February 2025, however, stock levels were lower at 195 162 tonnes. Stock levels have climbed from late 2025 – the December close was 255 162 tonnes.

Elsewhere, latest figures from the World Stainless Association show the total stainless steel melt shop production in 2025 was 64.2 million tonnes, an increase of 2.1% compared to 2024.

Within this, Asia produced 55.3 million tonnes, an increase of 2.7% compared to 2024. The European Union produced 5.7 million tonnes, a decrease of 1.9% while the United States produced 2.1 million tonnes, an increase of 7.6%.

Fourth quarter production saw a modest year-on-year increase in Asia to 14 275 000 tonnes while China’s melt shop output also crept up to 10 601 000 tonnes, a 2.3% rise year-on-year.

The EU also saw an increase to 1 438 000 tonnes, a moderate 8.8% rise. There was a 12.9% decrease for Other Countries and the US total rose 1.9%.

This market analysis was published in our latest issue >>